The Massachusetts Attorney General (AG) is increasing its enforcement in the motor-vehicle-repossession space. In a January 17, 2023 Assurance of Discontinuance (AOD), the AG stated that it is “conducting an investigation” into “entities collecting, servicing and/or funding” motor-vehicle-secured retail-installment contracts. The AG is focused on two primary areas of compliance:
- the content of the pre-sale and post-sale repossession notices and, in particular, that the notices include a statement that a customer’s deficiency after auctioning their vehicle would be based on the vehicle’s fair-market value; and
- the frequency of phone calls to debtors and whether those calls exceed the limits prescribed by 940 CMR 7.04(1)(f).
The current industry sweep is part of the AG’s larger focus on the treatment of consumers who own motor vehicles. For example, on March 9, 2023, the AG announced that she will start enforcing the automotive right-to-repair law, which requires that automakers provide consumers and repair shops with “telematics” information so that independent repair shops can perform the same services as authorized dealers.
Certain Pre-Sale and Post-Sale Notices Must Include Fair-Market Value
The Motor Vehicle Retail Installment Sales Act governs the repossession and sale of motor vehicles under retail-installment contracts. The statute includes detailed requirements for the content of pre-sale and post-sale repossession notices. In Williams v. Am. Honda Fin. Corp., 479 Mass. 656, 669 (2018), the Massachusetts Supreme Judicial Court found that creditors should include the following information in pre-sale notices under § 9–614(3):
The fair market value of your vehicle will be used to reduce the amount you owe, which is your outstanding balance plus the reasonable costs of repossessing and selling the vehicle. If the fair market value of your vehicle is less than you owe, you (will or will not, as applicable) still owe us the difference. If the fair market value of your vehicle is more than you owe, you will get the extra money, unless we must pay it to someone else.
The court concluded that this required language should also be added to post-sale deficiency notices. Id. at 668 (“We conclude that the notice that is required by the Uniform Commercial Code is never sufficient where the deficiency is not calculated based on the fair market value of the collateral and the notice fails to accurately describe how the deficiency is calculated.”).
The court also clarified that “fair market value” (which is not defined in the MVRISA) is “the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market.” Id. at 661 (citations and quotations omitted).
The AOD also bars the company from initiating phone calls more frequently than the limits prescribed in 940 CMR 7.04(1)(f), which provides:
It shall constitute an unfair or deceptive act or practice for a creditor to contact a debtor . . . [by] [i]nitiating a communication with any debtor via telephone, either in person or via text messaging or recorded audio message, in excess of two such communications in each seven-day period to either the debtor’s residence, cellular telephone, or other telephone number provided by the debtor as his or her personal telephone number . . . .
In Armata v. Target Corp., 480 Mass. 14 (2018), the Supreme Judicial Court of Massachusetts interpreted this to limit a creditor to two phone calls within a seven-day period. This includes calls where the creditor was unable to reach the customer and left a voicemail. While the AOD itself does not include any analysis of how many phone calls it believes is appropriate, presumably the AG is applying the same limitations laid out by Armata.
How to Prepare
Companies should evaluate their collection-call practices and pre-sale and post-sale repossession notices to Massachusetts debtors to anticipate and mitigate any potential risks. McGuireWoods’ state attorneys general practice helps clients navigate these challenging waters and advises clients on how to audit their notices and business policies. Proactive compliance helps debt collectors limit the scope of potential enforcement actions.
McGuireWoods would be happy to speak with your team to share experience-based insights about these challenging issues and to assist with responding to any inquiries from the AG.